AMLO Won. What Comes Next for Mexico?

(Bloomberg) -- Andres Manuel Lopez Obrador, Mexico's next president, has promised to transform the nation. AMLO, as he's known, pledged during his campaign to root out corruption, reduce violence, stop energy deals that aren't good for the nation and spur growth in impoverished areas. If that sounds like an ambitious to-do list, it is. And he won't be able to get started on it officially for five months, because Mexico has an unusually long presidential transition period -- about double the wait in the U.S. and Brazil.

1. When does Lopez Obrador become president?

He'll take the oath of office Dec. 1; the new Congress is sworn in Sept. 1. Supporters of AMLO'S leftist National Regeneration Movement (Morena) party may take majorities in both the Senate and Chamber of Deputies. While AMLO himself will have no official role until December, he will meet with the current president, Enrique Pena Nieto, on July 3, though it's unclear how cooperative Pena Nieto and his administration will be since their Institutional Revolutionary Party or PRI, fared poorly in the election. Pena Nieto on election night promised an orderly and efficient transition.

2. What's first on the agenda?

Lopez Obrador will likely ask Pena Nieto to suspend work on a new international airport for Mexico City, a $13 billion project that Lopez Obrador calls a waste of taxpayer money mired in corruption. He's suggested he may call for a public referendum to help him decide whether to continue the existing project or scrap it and build at a military airport instead. Some investors say stopping construction at the new airport would cost the country billions of dollars in wasted labor and materials. Then there's the renegotiation of the North American Free Trade Agreement, which could resume as soon as July. During the campaign, Lopez Obrador said he wanted to handle the renegotiation himself, to make sure Mexico's farmers are protected. But Jesus Seade, the economist AMLO tapped to lead his Nafta talks, now says that “fundamentally we are in complete agreement” with the public positions of Pena Nieto's negotiators.

3. Who'll be on AMLO's team?

In December, Lopez Obrador announced a number of possible cabinet picks, including Carlos Urzua, who served as Mexico City's finance minister from 2000 to 2003, when Lopez Obrador was mayor of the capital. One of his successors as mayor, Marcelo Ebrard, is also part of the team. AMLO's popular campaign chief, Tatiana Clouthier, the daughter of a former pro-business presidential candidate, may remain on board to continue to calm markets. AMLO says his top business adviser, Alfonso Romo, will be his chief of staff. And there are people who are said to be possibilities to join the administration even though they didn't publicly campaign for him, like Inter-American Development Bank economist Santiago Levy.

4. What will he do once he's sworn in?

Deal with the federal budget, since its deadline to be passed is Dec. 15. The new Congress will try to shape it to AMLO's liking, but they may be limited in what they can do. Pena Nieto's administration has already made commitments for 2019 spending and revenue, and the federal deficit shot up in the first quarter of this year as the PRI-controlled government splurged on anti-poverty programs ahead of Election Day. Since Lopez Obrador has promised to reduce the deficit, it may be difficult to find the money to fund his ideas, including salaries for unemployed youth to prevent them from joining criminal gangs and aid for struggling farmers. If he decides to ignore his deficit pledges and increase spending to keep his supporters happy, the peso could suffer.

5. How will he go about tackling corruption?

He's vowed to overhaul Mexico's system of government contracts, which he says have fueled payoffs and corruption, and to slash salaries of top officials, though it's unclear how cutting paychecks will encourage government workers to demand fewer bribes. What he hasn't done is suggest he'll prosecute current politicians for corrupt acts in office, which may also make it hard for reforms to stick. But he says he can lead by example. He'll take a smaller salary than Pena Nieto and he won't live in Los Pinos, the presidential palace, which he wants to turn into cultural center.

6. What's his plan to reduce crime?

He's said he'll stop using the nation's military to battle drug gangs; under their watch the murder rate has soared and more than 30,000 people have gone missing since Mexico's war on drugs began in 2006. He wants to spur development to offer alternatives to working for the drug trade and has floated the idea of amnesty for some nonviolent criminals, which would provide clean slates for them to start new lives.

7. Which energy deals might he target?

He's been inconsistent about how he'll handle the landmark 2014 legislation that opened the oil industry to private investment. Lopez Obrador has said he'll halt auctions of new oil contracts to companies and audit existing ones. But his campaign has also said that most of the contracts seem fine and that he won't do anything to disrupt investor confidence. He said he'll stop the privatization of the electricity sector and wants to build new refineries in order to increase Mexico's energy independence.

8. So why does he have to wait so long to be sworn in?

Mexico's constitution was modeled in part after the U.S.'s, and until the enactment of the 20th Amendment in 1933, U.S. presidents weren't sworn in until March 4 following the November election. During the decades in which the PRI held power, changes in policy between the end of one administration and the next were limited, so there was little pressure to shorten the gap. But reforms passed in 2014 will change the five-month wait in Mexico to three months in 2024, when the next president takes office. Lopez Obrador is the last president who will have so long between his election and inauguration.

The Reference Shelf

• Bloomberg Businessweek's profile of AMLO.
• Bloomberg's full election results.
• Bloomberg QuickTakes on Mexico's election issues and the sticking points on a new Nafta deal.

--With assistance from Nacha Cattan.

To contact the reporter on this story: Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editors responsible for this story: Carlos Manuel Rodriguez at carlosmr@bloomberg.net, Anne Cronin

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